On 28 May 2008, Japan requested consultations with the European Communities and its member States with respect to their tariff treatment of certain information technology products.

Japan claimed that the tariff treatment the European Communities and its member States accord to certain information technology products does not respect their commitments to provide duty-free treatment for these products under the Information Technology Agreement (ITA). According to Japan , the European Communities and its member States now impose duties on these products contrary to their scheduled duty-free tariff concessions arising from the ITA.

Japan asserted that a number of EC customs classification legal instruments, alone or in combination with Council Regulation (EEC) No. 2658/87 of 23 July 1987 on the tariff and statistical nomenclature and on the Common Customs Tariff, including all annexes thereto, as amended, appear to be inconsistent with the EC's and its member States' obligations under Article II:1(a) and II:1(b) of the GATT 1994 and their Schedules, and therefore nullify or impair benefits accruing to Japan under the GATT 1994.

On 18 August 2008, the United States, Japan and Chinese Taipei, jointly and severally, requested the establishment of a panel. At its meeting on 29 August 2008, the DSB deferred the establishment of a panel.

Panel and Appellate Body proceedings

At its meeting on 23 September 2008, the DSB established a panel. Brazil; China; Hong Kong, China; India; Korea; the Philippines; Thailand and Viet Nam reserved their third-party rights. Subsequently, Australia, Costa Rica, Singapore and Turkey reserved their third-party rights. On 12 January 2009, the the United States, Japan and Chinese Taipei requested the Director-General to compose the panel. On 22 January 2009, the Director-General composed the panel. On 23 January 2009, the United Statesand Chinese Taipei reserved their third party rights. On 21 July 2009, the Chairman of the panel informed the DSB that due to the complexity of the matter and the fact that the proceedings involve three complainants, the panel would not be able to complete its work within six months from the date of the panel's composition. The panel estimated that it would issue its final report to the parties in December 2009. On 21 December 2009, the Chairman of the panel informed the DSB that it expected to issue its final report to parties by the end of April 2010. On 29 April 2010, the Chairman of the panel informed the DSB that it now expected to issue its final report to the parties by early July 2010.

On 16 August 2010, the panel reports were circulated to Members. The panel concluded as follows:

FPDs (Flat-Panel Display Devices)

Concerning certain EC measures that resulted in dutiable tariff treatment of certain flat-panel display devices (FPDs), the panel concluded, with respect to the CNEN 2008/C 133/01 (which operates in conjunction with the CN), item 4 in the Annex to Commission Regulation No. 634/2005 as well as items 2, 3 and 4 in the Annex to Commission Regulation No. 2171/2005, that:

In the absence of the duty suspension under Council Regulation No. 179/2009, the measures direct national customs authorities to classify some flat panel display devices that are capable of receiving and reproducing video images both from an automatic data-processing machine and from a source other than an automatic data-processing machine, that fall within the scope of the FPDs narrative description and/or within the scope of the CN code 8471 60 90, under dutiable headings. Because the concessions call for duty-free treatment of products falling within their scope, this dutiable treatment is inconsistent with Article II:1(b) of the GATT 1994.

In the absence of the duty suspension under Council Regulation No. 179/2009, the measures direct national customs authorities to classify some flat panel display devices that have a DVI interface, whether or not they are capable of receiving signals from another source, that fall within the scope of the FPDs narrative description and/or within the scope of the CN code 8471 60 90, under dutiable headings. Because the concessions call for duty-free treatment of products falling within their scope, this dutiable treatment is inconsistent with Article II:1(b) of the GATT 1994.

Given the duty suspension currently in effect for certain products in dispute falling within the scope of the FPDs narrative description or within the scope of CN code 8471 60 90, the inconsistency with Article II:1(b) referred to in subparagraphs (a) and (b) above is eliminated because the duties are suspended and hence are not in excess of those provided for in the EC Schedule.

For those products in dispute falling within the scope of the FPDs narrative description or within the scope of CN code 8471 60 90 and that are not covered by the duty suspension with the result that they are subject to dutiable treatment, the duty suspension does not eliminate the inconsistency with Article II:1(b) for these products and therefore this dutiable treatment is inconsistent with Article II:1(b) of the GATT 1994.

The European Communities fails to accord treatment no less favourable than that set forth in its Schedule to the commerce of the other WTO Members, in particular certain flat panel display devices that are capable of receiving and reproducing video images both from an automatic data-processing machine and from a source other than an automatic data-processing machine, or that have a DVI interface, whether or not they are capable of receiving signals from another source. Thus, the European Communities is inconsistent with Article II:1(a) of the GATT 1994. This inconsistency is not eliminated by the duty suspension with respect to certain products in dispute falling within the scope of the FPDs narrative description or within the scope of CN code 8471 60 90 because the duty suspension measure does not eliminate the failure to accord treatment no less favourable to the commerce of the other WTO Members.

With respect to the CNEN 2008/C 112/03 which operates in conjunction with the CN, that:

The measures direct national customs authorities to classify under dutiable headings some set top boxes which incorporate a device performing a recording or reproducing function and retain the essential character of a set top box and that fall within the scope of the STBCs narrative description in the Annex to the EC Schedule. Because the concession calls for duty-free treatment of products falling within its scope, this dutiable treatment is inconsistent with Article II:1(b) of the GATT 1994.

The measures direct national customs authorities to classify under dutiable headings some set top boxes which utilise ISDN, WLAN or Ethernet technology, and that fall within the scope of the STBCs narrative description in the Annex to the EC Schedule. Because the concession calls for duty-free treatment of products falling within its scope, this dutiable treatment is inconsistent with Article II:1(b) of the GATT 1994.

By virtue of the inconsistency with Article II:1(b) of the GATT 1994, the measures accord treatment less favourable to such set top boxes than that provided for under the STBCs narrative description in the Annex to the EC Schedule and thus the measures are also inconsistent with Article II:1(a) of the GATT 1994.

The regulation requires dutiable treatment of certain ADP MFMs that fall within the scope of the concession for “input or output units” in HS1996 subheading 8471 60 of the EC Schedule. Because the concession calls for duty-free treatment of products falling within its scope, this dutiable treatment is inconsistent with Article II:1(b) of the GATT 1994.

By virtue of the inconsistency with Article II:1(b) of the GATT 1994, the measures accord treatment less favourable to certain ADP MFMs than that provided for under the EC Schedule and thus the measures are also inconsistent with Article II:1(a) of the GATT 1994.

The regulation requires dutiable treatment of certain non-ADP MFMs that fall within the scope of the concession for “facsimile machines” in HS1996 subheading 8517 21 of the EC Schedule. Because the concession calls for duty-free treatment of products falling within its scope, this dutiable treatment is inconsistent with Article II:1(b) of the GATT 1994.

By virtue of the inconsistency with Article II:1(b) of the GATT 1994, the measures accord treatment less favourable to certain non-ADP MFMs than that provided for under the EC Schedule and thus the measures are also inconsistent with Article II:1(a) of the GATT 1994.

With respect to the 2005 Statement, that:

Because the measure has guided and serves to guide the European Communities uniform application of the common customs tariff in a way that results in the application of duties to those ADP MFMs that fall within the duty-free concession, the measure is inconsistent with Article II:1(b) of the GATT 1994.

By virtue of the inconsistency with Article II:1(b) of the GATT 1994, the measures accord treatment less favourable to certain ADP MFMs than that provided for under the EC Schedule and thus the measures are also inconsistent with Article II:1(a) of the GATT 1994.

Because the measure has guided and serves to guide the European Communities uniform application of the common customs tariff in a way that results in the application of duties to those non-ADP MFMs that fall within the duty-free concession, the measure is inconsistent with Article II:1(b) of the GATT 1994.

By virtue of the inconsistency with Article II:1(b) of the GATT 1994, the measures accord treatment less favourable to certain non-ADP MFMs than that provided for under the EC Schedule and thus the measures are also inconsistent with Article II:1(a) of the GATT 1994.

With respect to item 4 of the Annex to Commission Regulation No. 400/2006, that:

The regulation requires dutiable treatment of certain ADP MFMs that fall within the scope of the concession for “input or output units” in HS1996 subheading 8471 60 of the EC Schedule. Because the concession calls for duty-free treatment of products falling within its scope, this dutiable treatment is inconsistent with Article II:1(b) of the GATT 1994.

By virtue of the inconsistency with Article II:1(b) of the GATT 1994, the regulation accords treatment less favourable to certain ADP MFMs than that provided for under the EC Schedule and thus the measures are also inconsistent with Article II:1(a) of the GATT 1994.

The regulation does not require the dutiable treatment of non-ADP MFMs with a facsimile function. Therefore, the European Communities has not acted inconsistently with Article II:1(b) of the GATT 1994 with respect to non-ADP MFMs with a facsimile function as the measure does not impose duties in excess of those provided for in the EC Schedule.

With respect to the CN2007, that:

The three relevant CN2007 codes require that certain ADP MFMs which fall within the scope of the duty-free concession for input or output units of an ADP in subheading 8471 60 of the EC Schedule be charged a duty of 6 per cent. Therefore, with respect to these products, the measure is inconsistent with Article II:1(b) of the GATT 1994.

By virtue of the inconsistency with Article II:1(b) of the GATT 1994, the CN2007 accords treatment less favourable to certain ADP MFMs than that provided for under the EC Schedule and thus the measures are also inconsistent with Article II:1(a) of the GATT 1994.

The three relevant CN2007 codes require that certain non-ADP MFMs which fall within the scope of the duty-free concession for “facsimile machines” in subheading 8517 21 of the EC Schedule be charged a duty of 6 per cent. Therefore, with respect to these products, the measure is inconsistent with Article II:1(b) of the GATT 1994.

By virtue of the inconsistency with Article II:1(b) of the GATT 1994, the CN2007 accords treatment less favourable to certain non-ADP MFMs than that provided for under the EC Schedule and thus the measures are also inconsistent with Article II:1(a) of the GATT 1994.

In conclusion, the panel found that to the extent that the European Communities has acted inconsistently with Articles II:1(a) and II:1(b) of the GATT 1994, it has nullified or impaired benefits accruing to Japan under that Agreement.

The panel recommended that the DSB request the European Communities to bring the relevant measures into conformity with its obligations under the GATT 1994. In doing so, the panel recalled that the European Communities had indicated that the Commission Regulation Nos. 634/2005 and 2171/2005 would be repealed. It further recalled that the European Communities had indicated that Commission Regulation Nos. 517/1999 and 400/2006 would be repealed as of October 2009. The panel stated that, however, since there was no evidence properly before it confirming such repeal, it proceeded on the basis that the said measures were still in force.

At its meeting on 21 September 2010, the DSB adopted the panel reports.

Reasonable period of time

At the DSB meeting on 25 October 2010, the European Union informed the DSB that it intended to implement the recommendations and rulings of the DSB and that it would need a reasonable period of time to do so. On 20 December 2010, Japan and the European Union informed the DSB that they had agreed that the reasonable period of time for the European Union to implement the recommendations and rulings of the DSB shall be nine months and nine days from the date of the adoption of the recommendations and rulings of the DSB. Accordingly, the reasonable period of time expired on 30 June 2011.

Implementation of adopted reports

On 6 July 2011, the European Union and Japan notified the DSB of Agreed Procedures under Articles 21 and 22 of the DSU. At the DSB meeting on 20 July 2011, the European Union said that, in June 2011, it had adopted measures necessary to comply with the DSB's recommendations and rulings. The adopted measures ensured the full and timely implementation of the DSB's recommendations and rulings. Japan said that it was not yet in a position to agree to the European Union's claim of full compliance and had a number of concerns about the measures the European Union had adopted. To facilitate the resolution of the dispute and reduce the scope of any procedural disputes, Japan and the European Union had concluded a sequencing agreement.

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